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Government to mandate stringent safety norms for domestic Commercial Vehicles

ICICIdirect Research 28 Mar 2025 DISCLAIMER

As to media sources, Government wants to further upgrade commercial vehicles and hence proposes that all new passenger vehicles designed to carry more than eight individuals, as well as buses and trucks, will be required to be fitted with Advanced Emergency Braking Systems (AEBS), Driver Drowsiness and Attention Warning Systems (DDAWS), and Lane Departure Warning Systems (LDWS). 

Furthermore, buses and trucks will also need to be equipped with onboard blind spot information systems to identify pedestrians and cyclists in proximity to the vehicle, thereby reducing incidents related to blind spots. 

These advanced driver assistance systems (ADAS) are intended to minimize accidents by automatically engaging the brakes in the event of a potential collision, alerting drivers to drowsiness or unintentional lane changes, and improving overall driver awareness. The government proposes to implement the same starting April 2026.  

We see this as a big positive for ZF CV as it can potentially double its existing content per vehicle from US$ 600 to over US$ 1,000 in times to come. 

The company has started suppling ADAS suite to some of the domestic customers, however its mass adoption is very low.  
ZFCV has maintained its leadership position in advance braking domain for domestic M&HCV space, supported by its wide product portfolio, deep OEM relationships, and increasing aftermarket penetration. With long run way of content increase and healthy cash positive B/S, we have a positive view on the company and assign a BUY rating valuing ZFCV at ₹ 16,300 i.e. 50x PE on FY27E 

The stock has always traded on the higher side on valuation bandwidth however given their technology prowess we believe this should not dither investors from playing this theme.

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